Question

Hultquist Corporation has two manufacturing departments--Forming and Customizing. The company used the following data at the beginning of the period to calculate predetermined overhead rates:

	Forming		Customizing		Total
Estimated total machine-hours (MHs)		2,000		3,000		5,000
Estimated total fixed manufacturing overhead cost	$	28,000	$	6,600	$	34,600
Estimated variable manufacturing overhead cost per MH	$	1.50	$	3.00

During the period, the company started and completed two jobs--Job C and Job L. Data concerning those two jobs follow:

	Job C		Job L
Direct materials	$	16,500	$	9,800
Direct labor cost	$	23,200	$	10,200
Forming machine-hours		1,250		5,750
Customizing machine-hours		1,250		1,750

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job L. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job L. (Do not round intermediate calculations.)

d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Forming department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Customizing department? (Round your answer to 2 decimal places.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job L? (Do not round intermediate calculations.)

h. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer 1

Answer a.

Forming Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $1.50 * 2,000 + $28,000
Estimated manufacturing overhead = $31,000

Customizing Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $3.00 * 3,000 + $6,600
Estimated manufacturing overhead = $15,600

Total estimated manufacturing overhead = $31,000 + $15,600
Total estimated manufacturing overhead = $46,600

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated machine hours
Predetermined overhead rate = $46,600 / 5,000
Predetermined overhead rate = $9.32 per machine hour

Answer b.

Job L:

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $9.32 * 2,500
Manufacturing overhead applied = $23,300

Answer c.

Job L:

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $9,800 + $10,200 + $23,300
Total manufacturing cost = $43,300

Answer d.

Job L:

Selling price = Manufacturing cost + Markup
Selling price = $43,300 + 80% * $43,300
Selling price = $77,940